The Flat Tax: Realistic Libertarian Goals

Vol. 1

Flat tax

One of the most common criticisms of libertarian-minded individuals is that we spend a lot of time talking about principles and ideals without laying out concrete, realistic ways to accomplish them. This series is meant to tackle some of the specifics of libertarian policy in a way they could actually be accomplished within the confines of the current system. While these ideas may not be considered “ideal” to the most principled of libertarians, they will be a vast improvement over current policy and showcase a path to bring a libertarian presence to the government. This will lead to an increase in the public’s willingness to vote for libertarian-minded candidates, and therefore, improve the ability of such politicians to take office.

Something that most libertarians and even some conservatives have come to agree on is the idea that taxation is theft. This is a simple idea that enrages progressives and puzzles moderates who might understand the logic, but fail to see how essential government services could be provided without what they consider to be a necessary evil. The political climate in America is miles away from something that could topple taxation altogether, and an institution as bloated and powerful as the federal government would never give up on some form of income tax in one fell swoop. However, one idea persists that may allow substantial progress towards increased economic freedom in America: the flat tax.

For those who are unaware, the flat tax is a style of income tax where everyone pays the same tax rate, rich or poor. This is in stark contrast to the current tax system, which is considered progressive because those with higher incomes pay higher tax rates, while many lower-income individuals are refunded all of the federal income tax they paid at the end of the year. Of the politicians who have suggested a flat tax, the most notable is Senator Ted Cruz (R-TX). Cruz’s plan calls for a flat 10% income tax, with a 16% business tax that would reduce tax revenue for the government by $768 billion over 10 years, but create widespread economic benefits by giving the average taxpayer a 9.2% decrease in taxes, raising wages by 12.2%, create 4.8 million jobs, create a 14% after-tax income growth, and, if managed properly, would increase the GDP by 13.9% in the long run according to the Tax Foundation. Other significant politicians who support a flat tax are Senator Rand Paul (R-KY), Housing and Urban Development (HUD) Director Ben Carson, and former Texas Governor Rick Perry (R) when he ran for president in 2012. The popular support from mainstream politicians makes the flat tax the obvious place to start for enacting realistic libertarian policy changes, but the idea has obstacles, including opposition from the left, especially from progressives, and the fact that the proposal’s success is partially dependent on Congress creating a $76.8 billion per year budget surplus while they are currently running on a projected $980 billion deficit for 2019.

Of those issues, lack of support in Congress is likely the biggest of them. For the bill to pass the Senate, 60 senators would have to vote in favor of it to end a filibuster, and half of the House of Representatives would have to support the bill, which simply will not happen during the current Congress, in which Republicans do not have those numbers. Democrats will not vote for such a bill because even if they are not fans of the new progressive wing of the party that includes Alexandria Ocasio-Cortez (D-NY), who would like to make the tax code even more progressive by taxing the rich at 70%, they still do support the current degree to which the tax code is progressive. To make matters worse, some of the more moderate Republican members of Congress could defect over a flat tax vote. After all, Paul and Cruz are among the most extreme economically speaking among the Republican Party, but they are also among the leaders of the GOP, which gives them powerful leverage in changing the minds of their colleagues. With any luck, their influence could be used to enact what would be the single most libertarian piece of legislation in decades.

The other major issue facing the flat tax is making responsible budget cuts to match. This is perhaps less likely to be achieved than the bill being passed itself, because unlike Republicans of the past, many of today’s Republicans show contempt for balanced budgets, as evidenced by a unified Republican government passing a $666 billion deficit in 2017 and an $830 billion deficit in 2018. While budget cut specifics will be discussed at a later time, increased defense spending under President Trump is an easy starting point, with the defense budget increasing to $750 billion a year in 2018 from $583 billion in 2017, the latter of which was negotiated under the Obama presidency. Repealing this increase alone would be more than enough to pay for the $76.8 billion per year needed to responsibly enact a 10% flat tax, although this would not be enough to erase the entire $980 billion deficit the federal government is facing this year. However, if the bill were enacted this year with no spending cuts, only 7.3% of the budget deficit would be due to a flat tax. If Congress is unwilling to reduce the debt regardless of the tax code, then a slightly increased deficit seems a small price to pay for increased economic freedom and the widespread benefits to the economy a flat tax would entail. This is why a flat tax is among the most likely potential libertarian policy outcomes, and a good starting point for increasing the size and power of the liberty movement.


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